30 Sep, 2023
TAX SERIES FOR BUSINESS
Tax is an integral part of every business. Some small business owners ignore the tax aspect of their business until they need a tax clearance certificate or it is required for other reasons.
We have listed some of the tax responsibilities that small business owners or those who have recently registered their businesses should be aware of.
1. REGISTER FOR TAXPAYER IDENTIFICATION NUMBER AND VALUE ADDED TAX
A Taxpayer Identification Number (TIN) is a unique identifier assigned to individuals and businesses for tax purposes. Immediately after registering your business with the Corporate Affairs Commission (CAC) register for Taxpayer Identification Number and Value Added Tax. You can not open/operate a corporate account without a TIN.
Value Added Tax (VAT) Registration: VAT is a consumption tax levied on the value added at each stage of production or distribution of goods and services. Failure to register for VAT after six months of registering your business may incur liability for late registration. Businesses that meet certain turnover thresholds are typically required to register for VAT. This registration allows them to collect VAT from customers and remit it to the government.
Read how to register for TIN/VAT at https://fathensoservices.com/blog/how-to-register-for-taxpayer-identification-number
2. SEPARATE YOUR BUSINESS FUNDS FROM PERSONAL FUNDS.
This is very important as the tax man sees personal funds in a business account as business funds that are liable to tax. you would need to explain and prove it is not. It is also best practice to keep both funds separate. Do not receive non-business transactions in your business account.
3. KEEP RECORDS OF YOUR BUSINESS TRANSACTION
Keep a record of all monies that come into your business account and all expenditures even the minute. The expenditures will help you with tax deductions and can be used to offset tax liabilities.
4. KNOW THE TAX OBLIGATIONS OF YOUR BUSINESS STRUCTURE
Most business owners set up their businesses without knowing the taxes applicable to their business structure. You should know your tax structure before setting up your business as this determines your tax obligations. While business name structure does not pay company income tax, it is imperative to note Companies do.
5. FILE YOUR TAXES ON TIME
Initiate the tax filing process as soon as your business begins operating. Postponing tax filing upon commencing business operations will result in penalties for late returns, along with interest on these penalties.
6. KNOW YOUR TAX DUE DATES AND DEADLINES
To avoid facing late filing penalties, it's crucial to be aware of tax deadlines and ensure timely filing and payment of taxes. If you're short on time, consider delegating your tax responsibilities to a professional tax expert.
It's important to recognize that business owners may lack awareness regarding their tax responsibilities concerning their business structure. Neglecting crucial obligations such as registering for a TIN/VAT, maintaining accurate business records, making incorrect tax payments, or engaging in tax evasion can pose significant challenges for small businesses. It is essential to remember that addressing these matters promptly can ultimately save you from tax-related difficulties. In other words, taking timely action can be your key to avoiding tax troubles.
Written by Victory Aburime